The global economic crisis has slowed the pace of poverty reduction in developing countries
The crisis will have permanent impact on several MDGs, including those related to hunger and infant mortality
Developing countries need to continue to match external support with domestic reform
April 23, 2010—An old man stooped to scoop muddy water from a puddle into his pail. “What I want most is clean water,” he said, to a man from the World Bank interviewing him on a street in Livingston, Zambia.
Delfin Go was the expert conducting a World Bank field survey back in 1995 in Livingston. Even as the man expressed his desire for such a basic need, Go could hear the roar of the mighty Victoria Falls just a few kilometers away. That was the sound of billions of gallons of clean water, and Go never forgot the sound of it.
The extent to which people across the world have access to clean water, education, food, healthcare and other basic needs is measured by the Millennium Development Goals (MDGs), a set of internationally agreed targets adopted in 2000.
The latest Global Monitoring Report 2010: The MDGs After the Crisis, of which Go is a lead author, estimates the impact of the crisis on the MDGs and whether the world appears on track to meet these targets. Produced by the World Bank and the International Monetary Fund, a part of the analysis is based on the IMF’s latest World Economic Outlook.
Developing world on track to halve extreme income poverty, but not hunger
Largely owing to strong progress in some regions before the financial crisis, the report says the developing world as a whole is on track to halve extreme income poverty from its 1990 level of 42 percent by 2015.
But as a result of the crisis, 53 million more people will remain in extreme poverty by 2015 than otherwise would have. Overall, the report projects that the number of extreme poor could total around 920 million five years from now, marking a decline from the 1.8 billion people living in extreme poverty in 1990 (see table).
However, the critical MDG target of halving the proportion of people suffering from hunger from 1990 to 2015 is very unlikely to be met, as over a billion people struggle to meet basic food needs, the report says. Both the 2008 food price crisis and the financial crisis that hit in the same year have exacerbated hunger in the developing world.
Moreover, malnutrition among children has a multiplier effect, accounting for more than a third of the disease burden of children under age five. According to the report, for the period from 2009 to the end of 2015, an estimated 1.2 million additional deaths may occur among children under five due to crisis-related causes.
Yet these effects might have been more serious. Pre-crisis policy reforms by developing countries, as well as strong actions by countries and by international financial institutions helped avert a much worse crisis. Governments kept social safety nets intact (at least through 2009), and massive efforts by the international community to limit economic contraction and contagion have paid off.
Spurred by recent strong performance in emerging economies and the recovery of global trade, GDP growth in developing countries is projected to accelerate to 6.3 percent in 2010, up from 2.4 percent in 2009, according to new IMF projections contained in the report.
Global output, meanwhile, is projected to increase to 4.2 percent this year, reversing a decline of 0.6 percent in 2009.
“The international community cannot afford to be complacent, since the recovery remains fragile, with long-term implications for many of the goals, including those related to health and education,” cautioned Justin Yifu Lin, World Bank Chief Economist.
Uneven progress across regions and goals
Before the crisis hit, progress on the individual MDGs was already mixed. The proportion of children under five who are underweight declined from 33 percent in developing countries in 1990 to 26 percent in 2006, a much slower pace than is needed to halve it by 2015. Improvement on this target has been slowest in Sub-Saharan Africa and South Asia, where as many as 35 percent of children under five suffer from stunting. (Read: Economic Crises Taking a Toll on Children)
Progress in reducing maternal mortality is advancing more quickly than thought. GMR 2010 includes new findings just reported in The Lancet that the maternal death toll worldwide dropped from 526,300 in 1980 to around 342,900 in 2008, far below the latest UN estimates of some 500,000 for the same year. These signs of improvement are encouraging. But the progress is fragile and the global target of a 75 percent reduction in maternal deaths by 2015 from the ratio that prevailed in 1990 remains distant. The report also calls for renewed efforts to achieve universal access to reproductive health, since advances in that area have been halting at best.
Most regions are making good progress on providing access to safe drinking water. But as a result of crisis, some 100 million more people may remain without access to safe drinking water in 2015.
Recovery through open trade, trade finance, and aid for trade
“The crisis is hitting everyone. But for poor countries, the impact will last long after the global economy has recovered,” said Go. “Furthermore, if recovery is not sustained, continued weak external conditions could lead to widespread domestic policy failure. History tells us that the consequences for human development will be disastrous,” he warned.
So far, crisis responses by international financial institutions such as the World Bank Group and IMF have been strong and swift:
The IMF provided the resources and policy advice to help prevent the crisis from spinning out of control. As of end February 2010, it had committed about $170 billion for crisis-related support.
The World Bank Group and other development banks sought to protect essential development programs and strengthen the private sector. More than US$150 billion (two-thirds from the World Bank Group) has been committed by multilateral development banks since the beginning of the crisis.
Although aid from the OECD’s Development Assistance Committee (DAC) rose by 0.7 percent in real terms in 2009 to $119.6 billion, it falls short of earlier commitments, especially for Sub-Saharan Africa. Excluding debt relief, ODA rose by 6.8 percent in real terms in 2009. Assistance from non-DAC donors and private sources is also rising fast. [link here to OECD-DAC total ODA in 2009]
The report urges developing countries and the international community to quickly establish appropriate policies for dealing with the post-crisis international economic environment. It makes these recommendations:
Ensuring an open trading system remains an important global goal. Completing the Doha Round would substantially improve developing countries’ market access and enhance their competitiveness through an agreement on trade facilitation.
Beyond Doha, progress is needed in negotiating new rules on trade-related climate change, and on food and energy security.
To ensure their institutions are capable of taking advantage of trade opportunities, developing countries have to continue domestic reforms to facilitate trade and business.
Aid flows need to be boosted, plus aid effectiveness and allocation need to be strengthened.
IFIs need to follow through with fundamental reforms so as to better respond to new post-crisis challenges facing low and middle income countries.
“Developing countries must take the driver’s seat on domestic reforms to make spending and service delivery more efficient,” Go says. “But the international community must help them regain momentum and proactively do more to build thriving communities. Given the world’s collective knowledge and resources, people should not have to drink from street puddles.”
To access much of the statistical data underlying the GMR, visit the World Bank’s new interactive and multilingual site: http://data.worldbank.org